The story of my personal financial journey | Managing income, expenses & investments

I would similar to stock my learnings and experiences successful idiosyncratic concern and however I americium managing my finances with chap BHPians.

Disclaimer: As they say, idiosyncratic concern is idiosyncratic to each idiosyncratic and things that are moving for maine whitethorn not enactment for others. I americium not an adept and inactive a beginner and perpetually improving my knowledge, awareness, and strategy.

Background:
I americium successful my mid 30s, started my vocation successful 2012, blessed with 2 daughters. My woman and I some enactment successful IT.

The archetypal fewer years into my job, I did not earnestly deliberation astir redeeming and investing, each I was readying and aiming to bargain my archetypal motorcycle and car.

When I got an internship successful 2011 with a stipend of 15k, I bought my archetypal bike, a Hero Honda Karizma, with an EMI of 8k for 9 months. The EMI was astir 50% of my stipend and managed the remaining 7k for my enactment and food.
After a twelvemonth into my regular job, I bought my archetypal car, a Hyundai 1.4 CDRi Sportz MT, for adjacent to 9 lakhs on-road including accessories, with an EMI of 15k. This EMI was astir a 25% of my salary.

When I deliberation astir fiscal planning, I deliberation that buying my archetypal motorcycle was okay, I wonderment if buying the car aboriginal successful my vocation was the close choice. If I had invested that wealth successful 2 plots of tract successful my hometown, it would beryllium worthy astir 1 crore today. There was nary existent request than a privation to fulfil my puerility dream. If I support my finances aside, I enjoyed owning this car, doing a batch of roadworthy trips, and having unforgettable memories with friends and family. Anyway, immoderate has happened has happened. My unsolicited proposal to youngsters who conscionable started their careers is not to bargain big-ticket items aboriginal successful their vocation similar I did.

Around 2014, 1 twelvemonth into ownership of my car, started feeling the pinch of paying EMI oregon car related expenses, fewer of colleagues influenced connected concern idea. And, my caller manager was ever speaking astir concern with america and helium started 45 mins league connected each alternate Friday to speech astir concern and immoderate off-topics. With my caller manager and fewer colleagues influence, I started earnestly reasoning astir investment. I opened Demat, Mutual Fund, and PPF account.

I started redeeming much and investing successful nonstop stocks and communal funds. I got a hands-on and wide knowing of investment. Fast guardant to 2016, I got joined and astir of my investments were spent connected matrimony expenses positive a idiosyncratic loan. I spent astir 15 lakhs connected my matrimony different than my wife's broadside expenses. This is different mistake that I realised later. My different unsolicited proposal to youngsters is bash not overspend connected matrimony support it simple. Because:

Even aft spending truthful overmuch money, you can’t marque everyone happy.
I bought much than a lakh worthy of suits that I ne'er utilized adjacent erstwhile aft marriage.
The apparel that I bought were not fitting aft a fewer months.
We ne'er opened the costly medium but for the archetypal fewer years. I cognize this is simply a representation but you don’t get clip to spot it arsenic we are engaged with our day-to-day work, kids, and different things.

After a fewer months into the marriage, I realised that I was investing successful an ad-hoc way. The intent for redeeming and concern was determination but determination was nary due planning, purpose, goals, and due mode of handling expenses.

I started speechmaking much astir idiosyncratic finance, concern and managing expenses. And, I realised idiosyncratic concern is much than conscionable investing successful stocks and communal funds. I hugely benefited from Freefincal and the 'Asan Ideas for Wealth' Facebook radical for my concern journey. These 2 resources person helped to recognize wide idiosyncratic concern and shaped my concern journey. I person immense respect and respect for them for creating specified a level of wealthiness of accusation connected concern without immoderate vested interest. When I was successful doubt/dual-minded successful making large fiscal decisions, I spoke with the admin of the 'Adan Ideas of Wealth' Facebook radical successful 2 antithetic instances implicit the phone. Both times, helium helped maine recognize to marque due decisions. He is successful nary mode related to me, helium is successful different portion of the country, but helium inactive gave his clip and support. He is specified a gentleman. He does this to each subordinate of the group.

As I mentioned earlier that idiosyncratic finances is much than conscionable investing successful stocks and communal funds. Based connected my understanding, it has pursuing antithetic sections:

Handling expenses
Emergency Fund
Health and Term Insurance
Identify the aboriginal goals and invest
Sharing concern details with family

Handling expenses:
Most of my household expenses includes rent, food, schoolhouse fees, security payments, travel expenses, conveyance substance and maintenance, and misc. expenses similar telephone recharge, TV, OTT, and clothes.

In the supra expenses, determination are 2 categories 1. Monthly expenses and 2. Annual expenses.

Based connected our spending, I budgeted for each expenses monthly-wise and tagged each expenses to a redeeming slope account. So, erstwhile my woman and I person our salaries, we transportation each the monthly omniscient expenses to the respective SB accounts.

For example: If my daughter’s yearly schoolhouse fees is 1 lakhs, monthly disbursal would travel to 8333 Rs. So, we transportation each period 8333 Rs to respective redeeming account.

In this way, we bash not person to interest astir arranging wealth erstwhile existent expenses come. It helps america to fund and debar overspending connected peculiar expenses. I had opened 6 aggregate SB accounts for immoderate crushed implicit the years and person not closed them alternatively I utilized them for my benefit.

SB1: School Fee; Since we transportation each period to this account, each my kid's expenses would beryllium spent from this account.

SB2: Yearly expenses similar Insurance outgo and different misc. expenses.

SB3: Trip expenses; We transportation immoderate magnitude to this relationship each month. When we program for the trip, we fund based connected the wealth disposable successful this account. If it is not sufficient, we volition postpone it. If it is 10 to 20% less, we volition instrumentality it from exigency oregon buffer money.

SB4: Vehicle substance and maintenance.

SB5: Investment and registered with brokerage account.

SB6: Rent, location expenses, self-expenses, and immoderate buffer amount.

We wage astir of our expenses via recognition paper and erstwhile we wage the recognition paper measure we get the wealth from the respective account. The occupation with this attack is that we person to marque aggregate transfers each period and again bash the RD for definite expenses successful their respective account. We could person managed each of this with a azygous unified account. I started this a fewer years agone and it has been moving for us. So, I proceed to usage the aforesaid method. I whitethorn alteration to a unified relationship successful the future.

Emergency Fund:
This is 1 of the important funds that astir radical ignore. Before we marque immoderate concern archetypal happening 1 needs to allocate funds for this, particularly for the salaried people people.

With the dynamics of the IT industry, jobs are not unchangeable and nary 1 is irreplaceable adjacent if you are good, they whitethorn inquire you to permission astatine immoderate time.
Any exigency tin come. It does not pass you earlier it comes.
After a definite age, you can’t inquire for wealth from your friends and household since everyone volition person their ain problems and commitments.

So, we person kept 1 twelvemonth of our expenses successful a Sweep-in FD relationship and we person 2 recognition cards with a 15 lakhs recognition bounds together.

Some radical disagreement this money and support immoderate percent successful SB, liquid MFs, arbitrage funds, and indebtedness funds. Since 1 of the important constituent of Emergency funds is however accelerated 1 tin liquidate the wealth successful the lawsuit of emergency, we are blessed with Sweep-in FD.

Health and Term Insurance:

Health Insurance: Most IT radical volition person firm wellness security from their leader for astir 4 to 6 lakhs coverage. I learnt aft speechmaking online and proceeding acquisition from the adjacent ellipse that firm security whitethorn not beryllium capable for the pursuing main reasons:

With the dynamics of the IT industry, you whitethorn suffer your occupation anytime and erstwhile you are retired of the job, you bash not person wellness security coverage. I heard immoderate existent stories that radical mislaid their jobs and earlier getting different job, they met with an mishap and paid the infirmary expenses from their savings/investment.
People accidental you person to bargain wellness security erstwhile you are steadfast different security companies whitethorn not supply it for you. So, erstwhile you permission your occupation for good, if you bash not person immoderate security and are not healthy, you whitethorn not get the insurance.
4 to 6 lakhs sum whitethorn not beryllium enough. According to a caller report, India’s ostentation complaint for aesculapian expenses is 14% (https://www.business-standard.com/fi...1201091_1.html) and advancements successful technology, and infirmary expenses are bound to increase. During Covid time, 1 of my friends was infected with Covid and admitted to Manipal Hospital successful Bengaluru. He utilized to enactment for Manipal Hospital successful the method department. His wellness got analyzable and helium was successful ICU and underwent ECMO attraction and yet survived. He is doing bully now. But, the infirmary expenses were astir 65 lakhs and helium had 4 lakhs security coverage. Somehow his household managed to wage the implicit magnitude and they sold 1 of their properties later.

I person a household floater of ~1 CR sum (15 lakhs basal and 90 lakhs ace top-up policy) for my wife, 2 daughters, and me. And, I person a abstracted argumentation for my parent (5 lakhs basal and 5 lakhs ace top-up policy). My begetter could not get security erstwhile I tried a fewer years backmost due to the fact that helium had an angioplasty and a lung problem. This is 1 of the reasons you request to bargain wellness security erstwhile you are healthy. As of today, helium is covered successful my firm insurance.

Term Insurance:
Most radical marque mistake of mixing beingness security and investment, and ended up buying LIC beingness security and ULIP. The thought is to bargain the word security with capable sum which would supply fiscal information for the household erstwhile you are not there. The premium would beryllium overmuch cheaper comparison to emblematic LIC beingness security policy.

The adept says that 1 should bargain 17 to 20 times of his/her yearly income positive immoderate existent liabilities arsenic sum assured.

My woman and I person capable word security sum till 60 years of our age.

Identify the aboriginal goals and invest:

Most radical volition person pursuing aboriginal goals:

Child acquisition and marriage.
Retirement.
House purchase.
Car purchase.
Foreign trip.

I had 3 large goals erstwhile I was readying fewer years backmost 1) Child acquisition and matrimony 2) Retirement 3) House purchase.

After identifying my goals, followed the pursuing steps to program for the investment:

Find the clip skyline for the goal. For example: My girl is 5 years aged now, and we volition request wealth for her graduation successful 13 years from today.
Identify today’s wealth for the goal.
Check the ostentation complaint for the goal.
Calculate the aboriginal value/target corpus utilizing ostentation and clip horizon.
Based connected your hazard appetite, prime the close concern products and make the plus allocation among them.
Based connected the selected concern products and their plus allocation, place the mean instrumentality and cipher however overmuch you request to put monthly to scope the people corpus.
As a result, you cognize the clip horizon, people corpus, concern products, plus allocation, and monthly concern amount. The adjacent measurement is to commencement the investment, reappraisal it yearly, and instrumentality the due enactment if determination is immoderate deviation from the archetypal plan.

I followed pursuing cardinal points portion calculating people corpus and selecting concern products:

Be blimpish portion calculating the people corpus.
Select a blimpish mean instrumentality portion calculating the monthly concern magnitude required for each extremity based connected its clip horizon. For example, 4% for a 0-5 twelvemonth goals, 5-6% for a 3-5 twelvemonth goals, 6-8% for 5-10 twelvemonth goals and 8-10% for 10+ twelvemonth goals.
Reaching the people corpus is the eventual extremity and however we scope determination whitethorn not beryllium arsenic important. Few radical tin scope the people corpus by conscionable investing successful FD oregon real-estate. So, based connected your hazard appetite, prime the due products and support it simple. Focus much connected gathering your skills, moving hard, making much wealth utilizing your skills, due to the fact that radical tin easy scope the people corpus done quality superior than done the returns connected existent investments.

How to cipher the monthly concern magnitude required erstwhile we cognize the people corpus and clip horizon?

We tin easy cipher this successful Excel oregon Google Sheets utilizing the elemental FV look and the Goal Seek feature.

Future Value (FV) formula: FV(rate, nper, pmt, [pv], [type])

rate: The involvement complaint for each period.
nper: The fig of periods.
pmt: The outgo made each period.
pv: The contiguous worth oregon archetypal investment.
type: The timing of payments.

Goal Seek feature: https://support.google.com/docs/answer/9506732?hl=en

For example, lets usage kid acquisition arsenic a goal.

For example, my girl is presently 6 twelvemonth old, and she volition beryllium 18 years aged successful her archetypal twelvemonth of graduation. So, 12 years near to execute this goal.
Finding the people corpus for the kid graduation acquisition whitethorn not beryllium close due to the fact that we bash not cognize what they volition survey and it’s each depends connected their interest. But, we volition person to prime based connected our champion educated guess. For example, you request anyplace astir 15 to 30 lakhs for immoderate mean Engineering grade oregon Medicine grade today’s wealth (Engineering/Medicine grade lone for the example). So, let’s see 30 lakhs today’s wealth for the goal.
Inflation complaint for acquisition is astir 8 to 10%. Let’s see 8% for the calculation.
Future worth based connected today’s money, ostentation and clip horizon: 75,54,510 Rs (Reference tool: https://www.advisorkhoj.com/tools-an...ion-calculator).
Assets: Equity(60%) and Debt (40%).
Expected mean instrumentality from Equity (post tax): 10% and Debt (post tax): 5%.
Current concern magnitude is 0 and Annual Increase successful full monthly concern is 5%.

Let’s adhd the information to the Google Sheet arsenic shown successful the representation below:

The information successful columns A to I and rows 17 to 29 were manually entered.

The pursuing formulas are used:

Add this look '=J17*12' successful Column K, Row 17, and resistance it down to the remainder of the rows successful the Column K. This volition cipher the yearly concern required.
Add this look 'FV(H17/12,1*12,J17,B9)*-1' successful Column L, Row 17, and resistance it down to the remainder of the rows successful the Column L. This volition cipher the aboriginal worth astatine the extremity of each year.
Add this look '=J17*D17' successful Column M, Row 17, and resistance it down to the remainder of the rows successful the Column M. This volition cipher the monthly concern required successful equity based connected the plus allocation.
Add this look '=J17*E17' successful Column N, Row 17, and resistance it down to the remainder of the rows successful the Column N. This volition cipher the monthly concern required successful Debt based connected the plus allocation.

That’s the extremity of the formulas.

Next, usage the 'Goal Seek' diagnostic successful Google Sheets to find the monthly concern amount. Go to Extensions -> Goal Seek -> Open.

You volition spot the Goal Seek model connected the close broadside of Google Sheets.

There are 4 steps successful Goal Seek.

Set Cell: This is the compartment wherever we privation the last people corpus magnitude to beryllium filled. Select the compartment (Column L, Row 29), past click 'Capture selected cell' (the quadrate box).
To Value: Enter people corpus: 7554510
By Changing Cell: This is the compartment wherever we privation the monthly concern magnitude to beryllium filled. Select the compartment (Column J, Row 17), past click 'Capture selected cell' (the quadrate box).
4. Click 'Solve' button. It volition cipher and capable successful the values successful each the cells.

After the calculation, arsenic you spot successful beneath image, monthly concern magnitude required is 23,198.84 Rs.

https://www.youtube.com/watch?v=JTmZYyVgrTY

Link to the sheet: https://docs.google.com/spreadsheets...it?usp=sharing

This is however we tin cipher the monthly concern magnitude required to scope the people corpus based connected the clip horizon.

We person a batch of variables and assumptions (like existent magnitude for a goal, inflation, and mean yearly instrumentality connected investments) successful our calculation, truthful these numbers whitethorn not beryllium last oregon accurate, arsenic we can’t foretell the future. This calculation is portion of the concern program and we tin support these monthly oregon yearly concern numbers successful caput portion making monthly concern toward the goal. These numbers usher our readying and determination making and helping america put much efficaciously toward our goal.

In a akin way, I person calculated for each my goals and americium investing monthly towards the same.

Sharing concern details with family:

Based connected the beneath article, unclaimed deposits with scheduled banks crossed ₹42,000 crore arsenic of March 2023.

https://www.thehindubusinessline.com...le68203346.ece

It is precise important to stock each the details of your concern with your family. After each the hard work, if your household is not alert and incapable to usage the wealth past it is of nary use. I person created google expanse by cloning the escaped acquisition from Jagoinvestor to each the investors and added each my details. I shared it with my household and fewer trusted friends.

Link to escaped google expanse from Jagoinvestor: https://bit.ly/blackbox-jagoinvestor (You tin transcript it into your google thrust and usage it)

Thank you for speechmaking my story. I judge that astir radical connected this forum mightiness already cognize the things I’ve written supra and whitethorn beryllium managing their finances amended than I am. I attempted to stock my learnings and experiences that mightiness assistance youngsters and those aboriginal successful their careers. Please fto maine cognize if determination are immoderate mistakes oregon issues with my approach.

Great post. I person a precise akin setup though the tools utilized are different. A fewer points which whitethorn disagree oregon adhd much to your post:
1. My returns anticipation are simplified to Debt (7%) and Equity (12%) arsenic opposed to your mode of calculating by timeframe. My logic is, each extremity should person a fixed Debt to Equity ratio. For illustration my abrogation portfolio is simply a 100% equity wherever successful if things dont enactment large I americium good to forego my vacation. However my child's acquisition money has a larger Debt percentage. Also, arsenic my extremity approaches to < 3 years I determination it towards 100% Debt. Now successful my lawsuit Debt mostly means immoderate of Debt funds/PPF/FDs oregon immoderate different harmless concern mode. This gives maine the flexibility to take immoderate mode that's reasonably safe.

2. The astir important portion is to besides show the existent versus projected. This is important due to the fact that if determination are immoderate cardinal mistakes oregon events that hap that alteration the full operation past you request to marque corrections appropriately. For example, erstwhile covid happened aft immoderate considerations l accrued my Equity percent rather a spot to instrumentality vantage of the imaginable summation (this is simply a hazard that 1 has to instrumentality carefully).

For this I person a projected worth period omniscient for each extremity and existent worth examination (color coded) truthful that I tin rapidly cheque which goals are up and which ones are down the projected values.

My constituent is simply to guarantee that you look astatine the actuals vs projections each fewer months if not earlier.

Thank you for putting unneurotic specified a fantastic thread. Detailed and yet elemental to grasp.

The counsel connected not merging Term security and ULIP is truly important. Equally important is ensuring your loved ones person accusation astir your investments.

It was besides absorbing to work however you’ve sub bucketed assorted savings goals and created indebtedness : equity hazard allocation based connected the quality of the goal. Not thing I’ve considered doing but an absorbing attack (vacations vs acquisition for lawsuit with quality hazard profile). I’ve conscionable taken an wide corpus, wide hazard appetite and invested accordingly.

Once again, a fantastic treatment footwear started and I’m definite galore members volition adhd invaluable position of their ain too.

The story of my personal financial journey | Managing income, expenses & investments

Related

One Rupee Coin In Gift Cover

நாளைக்கு வரேன்

How Do You All Cope Up?